Spot ethylene prices in northeast Asia have risen to the highest level since the week of 3 March on the back of a tighter June market and stronger demand.
Prices have now increased for a fourth consecutive week, with spot trades and discussions rising above $700/t cfr northeast Asia for the first time since the onset of the Covid-19 pandemic in the region. Argus assessed prices at $680-715/t cfr northeast Asia on 28 May.
Deals were concluded for June-arrival lots to northeast Asia at $700-715/t cfr. Further price increases could be pending, with market talk of another transaction possibly done at $730/t. This deal was not confirmed.
Ethylene supply is limited for June arrival in northeast Asia because of restricted arbitrage flows from Europe and the US.
"The dramatic fall in Asia in April meant few people fixed deep-sea for June," said one major trader, referring to the collapse in ethylene prices to $300/t cfr northeast Asia in April, in line with drops in energy futures. Lockdowns in major countries outside China added to the slowdown in derivatives production rates, accentuating the decline in demand at the time.
A slew of planned turnarounds in Japan and China in June is also expected to cap spot volumes for the region.
Japan's Maruzen shut its Chiba-based 525,000 t/yr cracker on 12 May, while Mitsubishi shut its 525,000 t/yr cracker on the same day. Both crackers are scheduled to resume production between late June and early July. And Mitsui is due to undergo a turnaround from 11 June until 19 July.
In China, Sabic shut its 1mn t/yr cracker in Tianjin for 64 days from 9 May, while Yangzi-BASF shut its 740,000 t/yr cracker in early May for nearly two months.
Ethylene demand from the derivatives sector in China has been stable-to-firm in April and May. The easing of restrictions in China has enabled downstream units to operate at higher rates. Operating rates in the key polyethylene (PE) sector in China are averaging about 80pc, while ethylene glycol (MEG) plants are running at 60-65pc.
The increase in ethylene prices is eroding margins at non-integrated producers in major downstream sectors. But there has been no talk of cuts to operating rates yet.
